Much of that money, it so happens, flowed through Cyprus.

His rapid rise was as typical for a Russian oligarch as is his deep dependence on Cyprus for offshore banking. Working in part through Cypriot trusts, Mr. Rybolovlev, a former doctor, sold his gigantic potash fertilizer mining conglomerate after a tumultuous and lucrative run as owner and spirited the money abroad. Then the good times rolled.

In 2008, Mr. Rybolovlev, now 46, bought a Florida mansion from Donald Trump for $95 million. At the time, this was the most ever paid for a private residence in the United States. Almost as an afterthought, he complained it was in such poor repair that it could not be inhabited.

A few years later, Mr. Rybolovlev bought the most expensive apartment ever sold in New York from the family of the former Citigroup chairman Sanford I. Weill, paying $88 million for the penthouse at 15 Central Park West.

“Anyone who is a Russian oligarch and wants to make sure that, over the long term, his assets are protected wants to make sure those assets are out of Russia,” said David B. Newman, a partner at Day Pitney, a New York law firm representing Mr. Rybolovlev’s estranged wife, Elena, in a long-running divorce case. “If you are a friend of the government, you do very well, but if that relationship turns — and this can happen quickly — you want to be out of Russia.”

Today, this common practice among wealthy Russians like Mr. Rybolovlev — using Cyprus to worm their way into the global financial elite and to protect themselves if they should fall out of favor with the capricious President Vladimir V. Putin — has drawn the Russian government deeply into the negotiations for a bailout of Cyprus’s banking system, whether officials there like it or not.

Russian money flowing into Cypriot banks dwarfs the island’s $25 billion economy. About 25 percent of Russian foreign direct investment moves through Cyprus, according to an estimate by Morgan Stanley, frequently in a “round-trip” process that serves to lubricate the Russian economy. Cypriot entities, often owned by rich Russians, lent $40 billion a year to Russia from 2007 through 2011.

With a fortune estimated at $9.1 billion by Forbes magazine, Mr. Rybolovlev has reasons to worry about his status at home. But he is also the largest Russian investor in the Cypriot banking sector, which has given him a huge stake in preventing its collapse. As far back as July, Mr. Rybolovlev was negotiating to help recapitalize the Bank of Cyprus, according to Alithia, a newspaper based in the Cypriot capital, Nicosia.

At the same time, while Mr. Putin might not mind seeing Mr. Rybolovlev suffer a bit, he has an interest in protecting Russian wealth held abroad because of the role it plays at home and the opportunities it presents to expand Russian influence. If no bailout from the European Union is forthcoming and Cypriot banks collapse, the risk to Russian companies and oligarchs, some of them much closer to Mr. Putin than Mr. Rybolovlev is, would be far graver than the potential loss of deposited funds to the 9.9 percent “stabilization tax” originally proposed by the European Central Bank. At a minimum, capital controls could freeze all funds now in Cyprus.

The stakes are particularly high for wealthy Russians: Moody’s, the rating agency, has estimated that Russian deposits in banks and loans to Cypriot companies total $70 billion, or about 4 percent of Russia’s gross domestic product. Some 42 percent of the value of Cypriot bank deposits is in accounts with more than half a million euros.

As is typical for Russian oligarchs, Mr. Rybolovlev set up corporate trusts in Cyprus with breezy-sounding names like Aries and Virgo. These were little more than post-office boxes monitored by lawyers. But those trust accounts owned vast, gritty mining enterprises deep in the Russian hinterlands and filled up with countless riches as worries about global food shortages in the last decade sent fertilizer prices sky-high.

Article source: http://www.nytimes.com/2013/03/23/business/global/wealthy-russians-ensnared-as-cyprus-crisis-deepens.html?partner=rss&emc=rss